American Indian Tribes’ Financial Accountability / 17
1
American Indian Tribes’ Financial
Accountability to the United
States Government: Context,
Procedures and Implications
Catherine Curtis and Miriam Jorgensen
Introduction
The relationship between American Indian tribes and the U.S. government is
complex and evolving. For years, it was best characterized by paternalism
and hostility, but in 1975, under President Richard Nixon’s leadership,
Congress passed the Indian Self-Determination and Education Assistance
Act. The policy it embodied acknowledged the failure of previous approaches
and reaffirmed the government-to-government relationship between Indian
nations and the U.S. government. Today, not only as a result of the Act and
its “self-governance” amendments, but also because of the tribes’ growing
connections with departments of the U.S. government other than the Bureau
of Indian Affairs (BIA), the relationship is characterized by flexibility in (or,
from a tribal perspective, sovereignty over) tribal program and budget
management.
This chapter, written at the request of the Research and Analysis
Directorate of the Canadian federal government’s Indian and Northern
Affairs Canada (INAC), provides an overview of the methods used to manage
the transfer of funds from the U.S. federal government to tribes.1 Research
was conducted largely through in-depth interviews with senior U.S.
government staff, tribal administrators and a review of readily available
background documents. Thus, this is a policy chapter more than an academic
review of program effectiveness. Further, it is worth noting that at the time
of the interviews, the BIA was embroiled in a court case over the
mismanagement of Indian trust funds;2 the scandal conditioned responses,
since the credibility of demanding accountability from tribes is clearly
affected by the agency’s own financial management and accountability
difficulties.
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Federal Allocations
The Bureau of Indian Affairs, an agency of the Department of the Interior
(DOI), is the principal federal agency responsible for the administration of
federal programs for the 560 recognized tribes in the United States. The BIA,
however, is far from the exclusive agent of the federal government in its
relations with tribes. For example, the Indian Health Service (IHS) at the
Department of Health and Human Services (DHHS) provides extensive
services to tribes in its role as the primary federal health care provider and
health advocate for Indian people. Within their respective areas of
responsibility, most other departments and agencies administer programs
specifically for tribes or, at a minimum, cite tribes as eligible applicants for
services available to state and/or local governments. Federal departments
with significant tribal programs include the Department of Housing and
Urban Development (HUD), Department of Justice (DOJ) and the
Environmental Protection Agency (EPA).
Historically, and at present, the BIA and IHS budgets provide the
majority of federal funds to tribes. One commentator estimates that these
agencies together account for approximately 65% of federal funding for
Indian programs and services.3 Although the amount of funds flowing to
tribes from other federal departments and agencies is fairly substantial, there
is a fundamental difference between the types of funding available from these
sources. In a report on tribal funding, the BIA notes, “other agencies’
programs provide project grants, loans, or technical assistance.”4 That is, a
significant portion of BIA and IHS funding is recurring, provided on an ongoing basis to tribal governments, while in contrast, most of the funds from
other departments and agencies are project grants or loans provided under a
specific program mandate.
Federal base funding for tribes is sourced primarily from the Tribal
Priority Allocations (TPA), a specific activity within the BIA budget. In the
words of the BIA, the TPA is the “principle source of funding for tribal
government operations and the provision of services to tribal members.”5 The
tribes’ base includes funding for several programs and services provided to
tribal members/citizens 6 as well as funding for local units of tribal
governments and BIA agency offices on reservations.7 There are eight TPA
program categories: Tribal Government, Human Services, Education, Public
Safety and Justice, Community Development, Resources Management, Trust
Services, and General Administration. The task force that proposed the TPA
budget system intended for most local programs to be eventually included in
this funding category. However, that goal has been hampered by Congress’
desire to earmark funds for specific programs. In 1998, approximately onethird of the overall BIA operating budget was base funding to tribes.8
TPA base funding is distinguished by the fact that tribes prioritize this
BIA budget element, giving “tribal governments the power to decide how
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American Indian Tribes’ Financial Accountability / 19
scarce federal funds should be allocated.”9 Tribes submit prioritized requests
for funding to the BIA, specify the desired level of funding per category, and
list categorical breakdowns for several different levels of estimated funding
(such as 90%, 100% and 110% of the previous year’s budget). In this way,
if Congress approves an increase in TPA funding for a given year, tribes have
identified their top candidate programs for additional allocations, and if TPA
funding is reduced, tribes have indicated the areas in which they will make
adjustments. Funding for TPA (and its precursor program) decreased in real
terms from 1981 to 1990, increased in the early 1990s, decreased again in
1996 and 1997, and was restored to the early 1990s level by the late 1990s.
It is widely recognized that base funding is insufficient for meeting the high
level of need in Indian Country.
While tribes with a large population or land area generally receive more
funds, the size of the TPA base allocation to individual tribes is not
determined by consistent principles. Rather, “TPA base budgets are a result
of history, geography, policies, politics and timing.”10 A tribe may have
developed programs independently or been allocated special funding to meet
immediate needs, and over time, some of these monies may have been
absorbed into its TPA base. Conversely, some programs have been removed
from the TPA budget, and tribes that had listed them as a high priority lost
significant TPA funding from their bases.11 The ad hoc way in which base
funding evolved has thus led to a considerable disparity in TPA base funding
between tribes. Recent increases to the TPA have exacerbated the problem,
since there has been general percentage increases based on the existing
distribution of funds.12
Although the budget estimates for base funding specify amounts
allocated to individual programs, tribes and BIA agency/regional offices
possess some flexibility in shifting available funds. The ability of a tribe to
reallocate its base funds is determined by the nature of its program
management agreement(s) with the federal government, which are described
in detail in the following section.
In addition to TPA base funding, tribes receive program-specific federal
funds. Many of these programs, run by the BIA, IHS or other federal
departments and agencies, are ongoing programs funded yearly. With the
exception of self-governance tribes discussed in the following section, these
funds are not subject to prioritization by tribes and must be spent to meet
specified, predetermined program objectives. Examples of recurring nonbase programs within the BIA budget include contract support, welfare
assistance, the housing improvement program, road maintenance, schools
operation and law enforcement. In contrast to base funds, BIA resources for
non-base programs are allocated to tribes using a specific method of
distribution, most commonly a formula or benchmarks.
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The BIA, IHS and other federal departments and agencies also fund
programs and projects of limited duration. This non-recurring program
funding is generally allocated through competitive grant processes. The
amounts involved can be substantial for tribes that choose to actively pursue
such resources.
Tribes identify funds available for yearly and special programs using a
number of information sources. Chief among these is the Catalogue of
Federal Domestic Assistance, a database of federal programs, projects,
services and activities providing financial and non-financial assistance. The
catalogue is available both in print and on-line. In addition, the Federal
Register prints “Notices of Funding Availability.” These information sources
are used not only by tribes, but also by state governments, local governments,
non-profit organizations, educational institutions and the general public.
Protocols and Conditions
In the last thirty years, the U.S. government and tribes have developed and
refined new protocols and conditions to govern transfers of funds in keeping
with the government-to-government relationship. The two major innovations
in tribal funding arrangements—self-determination contracting and selfgovernance compacting—currently apply only to programs of the
Department of the Interior (including the BIA) and the Indian Health Service
(which, as noted above, is an agency of DHHS). This section addresses
program grants first and then turns to these newer arrangements.
Program Grants
Federal departments and agencies other than the BIA and the IHS fund tribes
through competitive or formula-based grants. Additionally, the non-recurring
programs of the BIA and the IHS are funded as competitive grants.
Each department follows its own grant awarding procedures. Generally,
a tribe will submit a “needs statement” or “general identification of need.”
Tribal administrators interviewed noted that the application paperwork is
manageable, particularly if the tribe has a dedicated grants staff. They added,
however, that the competition for certain grants can be intense.
Recognizing the fragmented nature of existing grant funding sources,
attempts have begun in Congress to improve co-ordination. In introducing a
Bill to improve the co-ordination of Indian development funding between
federal departments, Senator Ben Nighthorse Campbell observes that
one reason for the lack of success, despite spending billions of
dollars promoting Indian economic development, is the absence of
a consistent and consolidated federal mechanism that targets
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American Indian Tribes’ Financial Accountability / 21
development resources to the areas and projects that are most
promising. Indian business, economic and community development
programs span the entire federal government, and for any given
project undertaken by a tribe there may be 6 to 8 or more agencies
involved. This fragmentation and lack of coordination is not
producing the kind of results Indian country so badly needs.13
While important, tribal interviewees’ focus was less on consolidation
than on the expansion of self-determination contracting and self-governance
compacting to other federal departments and agencies. Since grants are
specifically targeted and of limited duration, they are obviously not
particularly well suited for the provision of ongoing tribal programs and
services.
Self-Determination Contracts
The Indian Self-Determination and Education Act of 1975 (also known as
Public Law 93-638 or simply P.L. 638) recognized the limitations of direct
service delivery to tribal citizens and gave tribes the option of administering
programs themselves. A contract, the elements of which are described more
completely below, was the vehicle chosen for the transfer of control. Under
P.L. 638, tribes can elect to contract with the Department of the Interior
(including the BIA) or the IHS to self-administer one or several of the
existing federal programs for their tribal citizens. Approximately 525 of the
560 recognized tribes in the United States participate in at least one selfdetermination contract.14
The process of assuming management control of a BIA or IHS program,
as laid out in the Act’s regulations, is relatively straightforward. One of the
provisions is that a tribe can find out how much the agencies are spending
on any particular program for tribal citizens. Any program amount that is
currently being spent can be requested for transfer. 15 Tribes submit a
document identifying the program(s) that the tribal government intends to
manage. The proposal specifies how many people the tribe will serve under
the contract and the type of services that will be provided. Tribes can then
make adjustments in the program, providing that the basic program
objectives as laid out in the contract are met. Separate contracts must be
negotiated for each program that the tribe intends to administer and funds
cannot be transferred between contracted programs.
The underlying principle of self-determination contracting is that tribes
have the right to manage their program funds. The BIA or IHS cannot refuse
to work with a tribe that has chosen to contract. If a proposal is declined, the
BIA or IHS must provide technical assistance to overcome the stated
objections to the proposal. The regulations stipulate that a tribal proposal
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may only be denied, within ninety days of receipt of the proposal, for five
reasons:
1.
2.
3.
4.
5.
the service rendered to the Indian beneficiaries will not be
satisfactory;
adequate protection of trust resources is not assured;
the proposed project or function cannot be properly completed or
maintained;
the amount of funds proposed is in excess of the applicable funding
level; or
the subject of the proposal is beyond the scope of the programs,
functions, services or activities covered under the Act.16
In practice, very few requests for contracting are denied. As one BIA
representative emphasized, “It’s not really a negotiation.” Tribes can
challenge a negative decision either by appealing to the relevant departmental
Secretary or suing in a U.S. District Court.
The contracting regulations also stipulate that the tribe must meet
minimal baseline standards for its organizational management systems that
“permit preparation of reports required by a self-determination contract and
Act and permit the tracing of contract funds to a level of expenditure
adequate to establish that they have not been used in violation of any
restrictions or prohibitions contained in any statute that applies.” Seven
system elements are specifically mentioned: financial reports, accounting
records, internal controls, budget controls, allowable costs, source
documentation and cash management. The regulations are very clear,
however, that an Indian nation develops its financial management systems in
accordance with tribal laws and procedures.
Self-Government Compacts
Self-governance compacting is the most recent development in federal-tribal
relations. Pilot self-governance projects were run in the late 1980s and early
1990s, and the Tribal Self-Government Law was passed in 1994. Originally,
self-governance compacts could be negotiated only for Department of
Interior funds, including those of the BIA. However, eligibility for this type
of funding agreement has now been extended to IHS programs.
Under self-governance, tribes are able to set their own program priorities
within a global budget. Funding is transferred from the federal government
for available programs chosen by the tribe using what is essentially a block
grant. In late 2001, 80 tribes or tribal consortia had self-governance
compacts, a figure that encompasses the participation of 221 tribes (or
approximately 40% of the total number).
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American Indian Tribes’ Financial Accountability / 23
Tribes electing to compact must meet several criteria, which are
somewhat more stringent than the criteria for self-determination contracting.
The tribal government must pass a resolution in support of compacting,
undertake some type of planning activity and obtain a minimum of three
consecutive clean audits (conducted by an independent auditing entity) prior
to becoming a self-governance tribe. The Office of Self-Governance
evaluates tribal applications and negotiates compacting agreements between
tribal governments and the applicable federal departments and agencies.
Notably, this office is an arm’s-length federal agency, separate from the BIA.
As with tribes opting to manage programs under self-determination, if
the above conditions are met, the U.S. government is obligated to proceed
with self-governance compacting in response to a tribal request. Once a tribe
has compacted with the federal government, there are few (some say virtually
no) conditions in the Act that must be upheld in order to renew funding.
Accountability
Audits and reports are the two primary tools used to ensure that U.S.
government funds flowing to tribes are spent for their intended purposes.
Audits provide useful post-facto accountability by exposing technical
financial management problems. Non-audit reports, mostly in narrative form,
are used to evaluate the extent to which program goals are being met.
Generally, they are prepared at the program’s completion, but they also may
be requested at intervals during the program.
The Single Audit Act of 1984 (amended in 1996) is the primary vehicle
used to monitor tribal spending of federal funds. The Act requires that state
and local governments, Indian tribes and non-profit institutions receiving
more than $300,000 of federal funding in a year have an audit performed. It
was intended to reduce the reporting burden on non-federal entities that
receive significant amounts of federal funding by setting up a uniform system
of auditing. The Act attempts to replace program-specific auditing
requirements by providing standardized information on the grantee’s
financial management and compliance system to all federal funding
agencies.
An end-of-year report prepared in accordance with the Single Audit Act
includes the following information:
•
•
•
the results of a third-party audit of the grantee’s financial
statements;
a description of the system of internal controls put in place by the
grantee to protect assets; and
a report on compliance with federal laws common to all federal
assistance awards.17
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Even though departments and agencies still may choose to require
individual program audits, the Single Audit is widely accepted across the
federal government. For example, the self-determination and self-governance
legislation specifically require that an audit be carried out pursuant to the
Single Audit Act. In fact, it is the only statutory accountability reporting
required of self-determination and self-governance tribes. Federal
departments and agencies also are known to use audits prepared under the
Act as proof of sound management when making decisions about the
provision of future monies.
The implementation of the Single Audit Act is clarified in Office of
Management and Budget (OMB) circulars. Tribal governments follow
the accounting and financial reporting standards established by the
Governmental Accounting Standards Board (GASB), which sets standards
for all governments in the U.S. other than the federal government.18 Tribes,
states, counties, cities and public organizations such as universities and
power plants are required to follow GASB guidelines in order to obtain clean
audits. Two years ago, a Native American Finance Officers Association
representative was invited to join the technical advisory committee to GASB
in order to provide, in addition to general advice, input and direction for
tribal government financial issues. There are currently no specific GASB
financial accounting and reporting standards for tribal governments.
Non-audit reporting requirements differ according to the arrangement by
which the tribe receives its funds. Grants generally carry the most extensive
reporting requirements. Each grant requires an annual report and some also
contain provisions for quarterly or mid-year reports. There is no uniform
report format, which means that each granting department or agency sets
different standards for the reporting it requires. For Indian nations with
significant grant monies, the burden is onerous, and for certain programs,
tribal governments have been known to conclude that the administrative toll
makes pursuit of a grant not worth the effort.
Tribes with self-determination contracts provide annual reports on their
program operations. A BIA or IHS contracting officer monitors the tribes and
is mandated to collect certain information based on the requirements of the
contracted program(s).
Tribes operating under self-governance compacts are not required to
provide information on their program objectives. Although they are
encouraged to submit reports, unofficial estimates suggest that less than 50%
of self-governance tribes do so. This creates a difficulty for federal officials,
since their agencies nonetheless must report on the results of this category
of funding under the federal Government Performance and Results Act of
1993. The BIA complies by providing Congress with reports based on
information from its area and regional offices, with tribal comments attached.
BIA personnel admit, however, “these reports provide no standard
information about program accomplishments.”
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American Indian Tribes’ Financial Accountability / 25
Deficits and Difficulties
According to BIA officials, it is rare for tribes to run program funding
deficits. In grant and contract spending, there is a specific amount of money
designated for a defined, finite task, so it is difficult for a tribe to run a deficit.
Under self-governance compacts, the block grant nature of the funding
means a tribe can manage specific program deficits by switching monies
from one area into another.
When they arise, tribal financial difficulties most often are related to
internal problems. One BIA interviewee observed that financial management
difficulties are normally explained by one of two situations: inexperienced
tribal officials or tribal political conflict. BIA officials pointed out that the
agency’s regional and area offices work closely with tribes to resolve any
issues related to financial management. Tribal interviewees, however,
countered that BIA help in setting up their administrative functions was
negligible or that the advice, if available, was not useful.19
If financial management problems do occur, the granting department or
agency may opt to provide funds through a monthly drawdown. This places
the tribe in a “pay-as-you-go” situation. In general, the department or agency
will not provide additional funding until the tribe can prove that its
management and accounting procedures have been modified to rectify the
problem. In drastic cases, where a funding freeze would interfere in the
provision of essential programs or services, the federal funding agency may
reassume direct delivery.20 For example, the authors know of several recent
situations in which the BIA has resumed administration of law enforcement
services. In extreme cases, where the misappropriation of federal funds is
suspected, the matter is referred to the local Federal Bureau of Investigation
(FBI) office and prosecuted in a federal court.
Although tribes are not experiencing undue difficulty in maintaining
their program spending within available budgets, deficits in administrative
costs are a major problem. The lack of adequate financial support for contract
support (including indirect costs) is a long-standing issue and one that
seriously threatens the viability of the self-determination contracting and
self-governance compacting programs. While the legislation and regulations
for these funding programs lay out the need to properly fund contract support
costs, budget appropriations from Congress have failed to meet demand.21 In
the late 1990s, courts and administrative law judges began to award tribes
substantial damages against the federal funding agencies. In response,
Congress imposed a temporary moratorium on any new contracting in the
fiscal year 1999 and allocated an additional $10 million to contract
implementation in 2000.
Both BIA and tribal interviewees pointed to this shortfall of administrative funds as a primary source of financial difficulties for tribes. In order
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to support the administrative costs of grants and contracts when inadequate
funding is available, Indian nations are forced to cover the costs from
elsewhere in the tribal budget. Obviously, this presents particular difficulties
for tribes with minimal self-generated revenues, who must either use
program operation dollars or shoulder an administrative deficit. The National
Congress of American Indians observes that, “if tribes are not reimbursed
fully for their contract support costs and they therefore experience a shortfall,
they are effectively penalized for exercising their self-determination rights,
since the only choice left is to actually cut into the transferred BIA and IHS
programs themselves in order to cover the shortfall.”22
There is no comprehensive or specific documentation of tribal deficits
in program spending or government operations. A partial understanding of
overall tribal government finances can be gained from BIA’s analysis of
tribal debt levels, which was conducted as a complement to the Tribal
Priority Allocations review. BIA reviewed 311 tribal single audits for 1996
and found 128 tribes reporting long-term debt. The overall debt for the
reporting tribes was over $1 billion U.S. While the majority of tribes had debt
under $1 million U.S., 7 tribes had debts of more than $20 million. Certainly,
debt per se is not a cause for concern. In fact, the ability to qualify for debt
financing is an indicator of financial management strengths and the existence
of relatively assured sources of tribal government income. However, debt in
combination with other data is a useful indicator. For example, in the same
report, the BIA noted that a third of the tribes reporting long-term debt also
reported net losses from business enterprises (that is, approximately, 43 of the
311 for which single audits were reviewed). These tribes may have difficulty
servicing their debts and, therefore, are more likely to carry deficits in
program or government operations.
It is worth noting that tribal interviewees were emphatic that the option
of running deficits and accumulating debt is their prerogative. The attitude
expressed was that tribal governments should be treated no differently than
any other level of government. 23 Indeed, for tribal governments with
adequate income and financial controls, there is no reason for the federal
government to prevent tribes from assuming long-term debt for which they
are capable of taking responsibility and that may have important
developmental purposes. This contrasts greatly with the responsibility of
tribal governments and their federal trustees to prevent deficits that impede
the delivery of critical services and core government operations.
Financial Management Incentives
In the U.S. system of tribal funding transfers, the incentive to properly
manage funds is based on self-interest at the tribal level. In the words of one
BIA employee, “tribes don’t want to behave recklessly since they know it
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American Indian Tribes’ Financial Accountability / 27
jeopardizes their chances of receiving additional funds.” For example, unless
a Native nation that has failed to manage federal funds effectively in the past
can demonstrate improvement in its management systems, funding
departments and agencies are unlikely to award future competitive grants.
For Department of the Interior, BIA and IHS funds, the self-determination and self-governance policies also provide an incentive to prudent
management: tribes must demonstrate their abilities to take over programs.
Tribes interested in administering their own programs have a strong desire
to avoid direct service delivery by the federal government.24 By 2000, over
55% of the total BIA budget and 40% of the IHS budget was being spent by
tribal governments through the contracting and compacting programs. A
National Congress of American Indians report notes that “the nation’s selfdetermination policy has been a resounding success for tribal communities.
Virtually every tribe in the United States is involved in the operation of at
least some programs and many operate or control all available programs.”25
If a tribe has several self-determination contracts, there is a significant
incentive to move to self-governance compacting in order to gain the ability
to creatively design programs and redirect funds.
Certainly, there is an element of “sink or swim” in these funding
relationships. Tribes are given increased responsibility to manage funds but
must set up adequate financial management practices in order to take
advantage of the choices offered. Tribal administrators interviewed for this
chapter noted that their governments use several strategies to promote sound
internal financial management. Most often mentioned is the use of quality
outside consultants, particularly accountants and auditors. Interviewees also
pointed out that several Indian organizations provide support, education and
networking opportunities, such as the Native American Finance Officer
Association (NAFOA) and the Tribal Tax Conference. Administrators
agreed, however, that there is no one model, and that each Indian nation must
develop its own appropriate and workable system of financial management
and internal controls.
For self-governance tribes (and to a lesser degree for tribes engaged in
P.L. 638 contracting), accountability has shifted away from federal
procedures and requirements to oversight by tribal governments and tribal
citizens. As one BIA official observed, “either you are going to trust tribes
or you are not. It’s a difference in attitude: you either assume they are going
to fail, or you presume they want to be successful and create opportunity.”
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Conclusions for Canada
The U.S. experience in managing the various types of funding transfers from
the federal government to tribes highlights some of the challenges inherent
in balancing flexibility for tribes with the desire for the federal government
to control the money it is spending. Several initial observations can be made.
First, the move to increased tribal control over programs and services
being provided to tribal citizens stemmed from an essentially political
decision to deal with tribes on a government-to-government basis. The
resulting arrangements gave tribes more decision-making power and
financial maneuvering room, and had far-reaching consequences for tribal
financial management. Particularly under self-governance compacts,
accountability requirements for transferred funds are kept to a minimum as
federal rules mandate that tribes produce relatively little evidence of their
programs’ effectiveness. Further, the U.S. government has little control over
which tribes get this flexibility, since under its rights-based approach tribes
can choose whether or not to participate. In order to participate, tribes must
prove that they can meet the established eligibility criteria.
Based on the interviews conducted for this chapter, however, it appears
that the American approach has been fairly successful. Particularly under
self-governance arrangements, responsibility for keeping tribal governments
accountable for the way funds are handled has, in effect, been transferred to
tribal citizens. Such accountability depends on the administrative
mechanisms within the tribal government, their transparency and, ultimately,
on voters’ democratic choice to punish those who allow funds to be
mismanaged. That tribal citizens actually have the resources to exercise this
responsibility is not a condition for entry into compacting agreements.
Whether or not they do is a question beyond the scope of this chapter, and is
an important topic for future research.
Second, one of the important features of the system of accountability in
the U.S. is that tribal governments are treated similarly to other levels of
government that receive federal funds. Tribal interviewees’ comments
suggest that this gives legitimacy to the federal government’s auditing and
accounting procedure requirements. An additional advantage to this even
treatment in evaluation is that it makes tribes eligible for a broad range of
funding opportunities. In other words, they may apply for funds from many
federal programs alongside state and local governments and are not restricted
to applying for funds that have been set aside specifically for Indians.
Even so, it should be noted that the administrative systems required to
solicit and manage U.S. federal funding are complex. Many First Nations in
Canada have very small populations, which may make it difficult to find an
individual within the community with the necessary financial and
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American Indian Tribes’ Financial Accountability / 29
administrative expertise. If a small community hires expertise, it may find it
difficult to oversee the relationship. Given these considerations, a third
observation is that the tribal consortia model may be an interesting
organizational form for Canadian First Nations to explore. In the U.S.,
consortia are used mainly in Alaska and California, where tribes are typically
small and the settlement pattern more closely resembles that found in
Canada. Since the opportunity to enter self-determination contracts and selfgovernance compacts is made available to both tribes and consortia, the
policy ensures that small tribes with limited personnel and administrative
resources may still benefit from local program control. Critical aspects of the
consortia are that tribes choose membership (it is not externally dictated),
that consortia action may be restricted to one or a few issues (most consortia
do not deal with a smorgasbord of programs), and that they are Native-run.
Together, these elements help the consortia fit within the spirit of selfgovernance.
A fourth issue underlined by the U.S. example is that a large number of
First Nations lack access to significant non-federal revenue. South of the
border, it is generally those tribes that are most reliant on federal dollars for
tribal government revenue that have been most in need of adequate contract
support funding (indirect cost reimbursement) and most tempted to use
program funds to support purposes other than those for which they were
intended. While a “pay-as-you-go” approach to program funding is one
solution, it is not adequate when the real problem is an underdeveloped and
insufficiently funded tribal administrative system. It is illustrative that every
tribal interviewee stressed the importance of obtaining the resources to
properly support the development and maintenance of tribal administrative
systems. Some suggested that this could take the form of direct technical
assistance from the federal government or the form of funding to hire an
outside party to consult on management methods.
A final note of caution needs to be sounded on the relationship between
accountability and the allocation of funds. Although the self-governance
arrangement has proven to be popular with tribes, the lack of reporting of
results to the federal government is somewhat problematic. While
accountability to tribal citizens rather than the federal government leads to
priorities more in tune with local realities, the overall budget for selfgovernance programs is still allocated by Congress. Without in-depth
reporting, there is limited information on which Congress can base funding
decisions. As one BIA employee pointed out, “it’s hard to make a convincing
case for extra funding for a specific need when you will not necessarily
spend the money on that program.” A tribal interviewee countered that
lobbying at Congress takes care of this problem. In Canada, where funding
allocations are determined globally by Parliament and implemented by the
civil service, an approach based on lobbying is not functional. Thought must
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be given to finding a method or type of objective-based reporting that is not
intrusive or burdensome to First Nations. To date, this goal has eluded U.S.
policy-makers.
Conclusion
Financial management capacity is a crucial element of overall tribal
governing capacity. As this examination has highlighted, it may also provide
a critical underpinning to self-rule. As tribes and First Nations regain control
over government functions and activities in their communities, other research
suggests it is likely that socioeconomic development will follow.26
The U.S. has experienced some notable success by responding to tribes’
requests for increased tribal power over the management of programs and
services provided to tribal citizens. In turn, many tribes have taken over the
responsibility for spending funds in their communities. Rather than
producing a situation in which funds are misused or spent ineffectively,
contracting and compacting have, for the most part, led to efficient programs
more in tune with tribal needs. Tribes have risen to the challenge of
expanding their government functions by setting up internal accountability,
controls and financial management procedures. The alternatives of
dissatisfied tribal citizens, a return to direct service delivery by federal
departments and agencies and/or reduced grant monies, are sufficient
incentives for most tribes to maintain a viable system. With attention to
capacity development and adequate funding, contracting and compacting
type arrangements can be considered a feasible model for moving towards
an improved government-to-government relationship between First Nations
and the Government of Canada. Opportunities for grant monies from a wider
variety of federal departments and increased symmetry between tribal,
provincial and municipal governments may be elements of an expanded
model with still more incentives for good tribal government management.
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American Indian Tribes’ Financial Accountability / 31
Endnotes
1. While states may have a variety of contracts with tribes (informants from the
State of Montana reported as many as 500 in early 2002), the U.S. federal
government provides the overwhelming majority of external funds flowing
to tribal governments.
2. Interviews were held between December 2001 and February 2002. During
those months, there were dramatic developments in the Cobell v. Babbitt
(now Cobell v. Norton), a class-action lawsuit filed in 1996. The suit’s
plaintiffs allege that billions of dollars in Indian trust funds are unaccounted
for. The Interior Department manages over 300,000 trust accounts on behalf
of individual Indians, which generate over $500 million a year in revenue
from Indian-owned lands. Numerous internal and external reviews have
found acute problems with missing records and poor accounting practices.
In December 2001, a federal court judge ordered that all on-line operations
of the Individual Indian Monies trust data system be closed down due to a
severe risk of penetration by hackers and other unauthorized individuals. In
response, the BIA shut down its Internet site and, for a time, all external email capability. Also, in December 2001, Interior Secretary Gail Norton
went on trial for contempt of court for ignoring court orders to clean up the
trust and for submitting false reports on trust reform.
3. Jordan S. Dill, Indian Issues of Consequence website
(www.dickshovel.com/biafnd). The percentage of funds provided to Indian
Country from the BIA and IHS has been falling over time, but these
agencies still provide the majority of funds to Indian Country.
4. U.S. Department of Interior, Bureau of Indian Affairs, Report on Tribal
Priority Allocations, July 1999, 48 (hereafter, TPA Report).
5. Ibid.
6. The technical language of federal law in the United States refers to “tribal
members.” Increasingly, however, American Indians and their advocates use
the phrase “tribal citizens” to reflect tribes’ status as nations and their
members’ status as citizens of those nations.
7. The BIA area (regional) and central (national) office operations are not
funded from TPA, but from separate allocations in the budget.
8. Calculation based on 1998 budget figures as reported in the TPA Report, 16.
9. TPA Report, 14.
10. TPA Report, 37.
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11. One example is law enforcement. Congress agreed to increase spending as
long as the funds were earmarked for this purpose. The program was thus
removed from tribal base amounts.
12. TPA Report, 14.
13. U.S. Senate, Statements on Introduced Bills and Joint Resolutions, February
15, 2001, S1471. This Bill was introduced in the first session of the 106th
Congress and referred to committee on February 15, 2001. The Senate
Committee on Indian Affairs held hearings on the Bill in early May 2002,
but further action was not taken before the close of the Congressional
session.
14. An individual tribe or a consortium of tribes may elect to contract. Many
tribes, particularly smaller ones, have elected to participate in contracting
via consortia. Therefore, the estimate reflects participation in contracting
and does not necessarily imply that each of the 525 has individually
contracted with the BIA or IHS.
15. The program amount does not include certain administrative costs. The
funding of indirect cost has been an ongoing issue for tribes and will be
further discussed under the heading “Deficits and Difficulties” below.
16. U.S. Code of Federal Regulations, Title 25, Section 900.22.
17. TPA Report, 11.
18. The GASB operates under the auspices of the Financial Accounting
Foundation. GASB and the Financial Accounting Standards Board (FASB),
its private-sector counterpart, determine the Generally Accepted Accounting
Procedures (GAAP) for audits.
19. Of course, tribal government perceptions of the BIA’s capacity for giving
financial management advice are coloured by the scandal surrounding the
Indian trust monies. See footnote 2.
20. Federal program managers were unsure whether resumption of service
delivery could be done for a self-governance tribe without a tribal request.
Such a move by the BIA could perhaps lead to a court challenge.
21. Indirect cost rates are determined on a tribe-by-tribe basis by the
Department of the Interior Office of the Inspector General or the
Department of Health and Human Services Division of Cost Allocation.
One reason for individualized administrative cost allocations is that tribal
rates are generally higher than the comparable federal rate. Tribes counter,
however, that the DOI and DHHS fail to take resources located at the area
and central offices into account.
22. National Congress of American Indians, National Policy Work Group on
Contract Support Costs Final Report, 22.
23. Yet it is also worth noting that some U.S. cities and states have passed “no
deficit” legislation that disallows deficit program or operational spending.
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American Indian Tribes’ Financial Accountability / 33
24. Admittedly, some U.S. tribes choose not to administer or control federal
programs on the principle that it weakens the federal government’s trust
responsibility.
25. National Policy Work Group on Contract Support Costs Final Report, op
cit., 21.
26. See, for example, S. Cornell and J. P. Kalt, “Sovereignty and NationBuilding: The Development Challenge in Indian Country Today,” American
Indian Culture and Research Journal, 22, no. 3 (1998): 187–214.
References
Hinkle, J. 2001. “Chipping Away at the BIA.” American Indian Report
(December): 12.
National Congress of American Indians. 1999. National Policy Work Group on
Contract Support Costs Final Report (July).
Native American Finance Officers Association. 2001. New Financial Reporting
Model for Tribal Governments, Implementation Guide for GASB34.
Office of Management and Budget. 2002. Budget of the United States
Government, Fiscal Year 2003. Appendix.
U.S. Department of Health and Human Services. Indian Health Service. 1999.
FY 1998 Accountability Report.
———. Internal Agency Procedures Workgroup. 1999. Internal Agency
Procedures Handbook for Non-Construction Contracting Under Title I of
the Indian Self-Determination and Education Assistance Act (July).
U.S. Department of Interior. Bureau of Indian Affairs. 1999. Report on Tribal
Priority Allocations (July).
———. Tribal Workgroup on Tribal Needs Assessments. 1999. Empowerment of
Tribal Governments: Final Workgroup Report (May).
U.S. Government Printing Office. 2002. U.S. Code of Federal Regulations, Title
25. Washington, D.C.
U.S. Senate. 2001. Statements on Introduced Bills and Joint Resolutions (15
February).
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Interviews
Note: Interviews were conducted with the promise of confidentiality. Thus,
only job titles and approximate locations identify the interviewees who
contributed to this report.
Program Coordinator. Tribal Government (of a Northwestern Tribe). 17
December 2001.
Programs Administrator for Social Services and Self-Government Coordinator.
Tribal Government (of a Northwestern Tribe). 28 January 2002.
Chief Financial Officer. Tribal Government (of a Northern Lakes Tribe). 30
January 2002.
Financial Manager. Tribal Government (of a Northern Lakes Tribe). 30 January
2002.
Senior Executive. Office of Self-Government, U.S. Department of Interior. 20
December 2001.
Senior Manager. Office of Self-Government, U.S. Department of Interior. 20
December 2001.
Area Manager. Office of Self-Government, U.S. Department of Interior. 30
January 2002.
Senior Manager. Self-Determination Services, Bureau of Indian Affairs, U.S.
Department of Interior. 30 January 2002.
Senior Manager. Trust Policy and Management (previously in Audit and
Evaluation), Bureau of Indian Affairs, U.S. Department of Interior. 28
January 2002.
Analyst. Audit and Evaluation, Bureau of Indian Affairs, U.S. Department of
Interior. 17 December 2001.
Attorney specializing in Indian issues. Washington, D.C. law firm. 3 January
2002.
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